NGOs, Lost In The FCRA Maze

A stringent law with tight procedures and very broad conditions,
<div class="paragraphs"><p>Children look at a map of the Alice in Wonderland Maze at Walt Disney Co.’s Shanghai Disneyland theme park in  China.(Photographer: Qilai Shen/Bloomberg)</p></div>
Children look at a map of the Alice in Wonderland Maze at Walt Disney Co.’s Shanghai Disneyland theme park in China.(Photographer: Qilai Shen/Bloomberg)

A library in Bhavnagar, a rotary club in Jalgaon, a women's university in Mumbai, an eye hospital in Muzaffarpur, a children's home in Chennai and an animal rescue group in Assagao are among thousands of non-governmental organisations that lost access to foreign contributions as the year was turning.

By one estimate, in this latest round, 5,844 non-governmental organisations saw their registrations under the Foreign Contribution (Regulation) Act, 2010 'deemed to be ceased' or, simply put, not renewed by the Indian government.

But, 62% of them were not actively receiving foreign funds or at least not large amounts of them, says Sanjay Agarwal, an accountant who has worked in the sector for over three decades.

Agarwal's consulting firm AccountAid parsed the data to find that of the affected 5,844 NGOs...

  • 3,604 received an average Rs 45,000 per annum in foreign contributions.

  • Another 1,341 reported an average of Rs 4 lakh p.a.

  • 790 reported an average of Rs 30 lakh p.a.

  • The worst hit were 108 who were reporting an average of Rs 22 crore p.a.

All told, the non-renewals will create an annual shortfall of about Rs 745 crore in NGO budgets. This money is spread across religious, social, educational, economic and cultural activities, Agarwal, who has written several books on FCRA, said in an interview with BloombergQuint over both phone and email.

The data both reveals and conceals important aspects of a story that has made the headlines this month.

The Amounts Involved

On the face of it, while every rupee the social sector gets is important, Rs 745 crore is not a debilitating loss. In fiscal 2019-20, private sector funding totaled Rs 64,000 crore, according to the Indian Philanthropy Report by Bain. Of which Rs 16,000 crore was via foreign sources.

That said, more organisations have had their FCRA licences deemed ceased and cancelled than are currently active, as per the Home Ministry website on Jan. 20.

  • Active: 16,888

  • Cancelled: 20,675

  • Deemed Ceased or Expired: 12,521

Variety Of Organisations Denied

The government does not provide a list of affected entities, but official FCRA website data collated by AccountAid shows the organisations impacted are across different religious or social causes, corporate benefactors and states.

The more prominent ones, such as Missionaries of Charity, Ramakrishna Mission, Jawaharlal Nehru University, Oxfam India, IIT-Delhi, India Islamic Cultural Centre, Shri Saibaba Sansthan, Azim Premji Foundation, Biocon Foundation, made the headlines and, thereafter, some even had their registrations renewed.

Thousands of other smaller ones remain unnoticed. Why their registrations were not renewed is unclear as reasons are not publicly disclosed.

Reasons For Non-Renewal Could Be Many

Conversations with NGOs, lawyers and sector experts suggest a host of reasons for non-renewal, some self-inflicted and others by government.

→ Small NGOs receiving meagre foreign contributions may lack resources to comply with ever-tightening FCRA law and rules.

→ The online process may be challenging for many grassroots organisations in far-flung areas.

→ Some may not have filed in time due to Covid exigencies.

→ Others may have not been able to open a State Bank of India Delhi account as the recent amendment requires.

→ Many may have not wanted to.

Agarwal said, now all board members of an NGO have to submit an affidavit for FCRA registration/renewal and not all are comfortable with that.

→ A few may have wanted to consolidate multiple registrations.

For instance, two Tata Trusts lost their registrations. When queried, a spokesperson told this reporter on the phone that those registrations were not needed and new ones for different trusts had been applied for separately.

She didn't send a written response to BloombergQuint's queries. Nor did any of the 20 other NGOs this reporter emailed.

Suspicion And Mistrust

While the numbers suggest a high volume, low-value impact, the opacity of process and lack of detailed reasons for non-renewal/cancellation foster an atmosphere of mistrust and suspicions of political action against NGOs.

NGOs are provided with vague justifications like ‘adverse inputs’ or against ‘public interest’ and so one can only speculate on the real purpose, said Ingrid Srinath, who has worked in the non-profit sector since 1998.

The pattern does suggest two broad goals—one, to weed out defunct organisations and permissions, and the other to silence organisations that are critical of government policies and actions, with the former lending cover to the latter.
Ingrid Srinath, Social Sector Expert

The restoration of licences for a few, such as Missionaries of Charity, Ramakrishna Mission, JNU, Azim Premji Foundation, have confounded matters further.

"Again, since no clear reasons have been provided, one might speculate that the restorations either result from genuine realisation that errors were made, or that pressure from influential parties—domestic or international—caused the changes," Srinath added.

Srinath is director at the Centre for Social Impact and Philanthropy at Ashoka University, but spoke to BloombergQuint in her personal capacity.

The Home Ministry's FCRA department has not responded to BloombergQuint's queries.

The political crackdown on foreign funding has targeted marquee names such as Greenpeace India and Amnesty India. And, while the action may have escalated in 2021 with over 12,000 cancellations, the problem dates back many years.

It All Started In 2010...

While FCRA licence cancellations occurred even in the 80s, 90s and 2000s, according to Sanjay Agarwal, the 1976 law mostly targeted foreign contributions to political organisations.

The new law in 2010, shepherded by the UPA government, went after NGOs.

It required FCRA registrations, earlier open-ended, to be renewed every five years. Since then "we've seen successive governments amend this law and its rules to progressively narrow the space for civil society", said Srinath.

Tight Procedures, Broad Conditions, Heightened Scrutiny

As it is framed and after the 2020 amendment, it's a stringent law with tight procedures and very broad conditions, said Sidharth Luthra, senior advocate and former Additional Solicitor General of India, in emailed comments to BloombergQuint.

Luthra referred to the wording of Section 12 (4) that lays down conditions for grant of FCRA certificate and prior permission to receive foreign contributions.

"The use of words ‘undesirable purposes’ and use of the term ‘reasonable’ as a prefix to activity or project without defining them add vagueness and are apt to lead to a misuse of discretion as there are no legal guiding factor on how it is to be understood," he said

Agarwal said amendments to the 2010 law and rules have led to a heightened level of scrutiny and restrictions on genuine NGO collaboration too. These include...

  • More scrutiny of documents, financial statements and activity at the field level.

  • Board member antecedents are verified via Aadhaar number and affidavits making them responsible for any lapse on part of the NGO or for failure to report a possible lapse to MHA.

  • FCRA audits, earlier infrequent, have now been outsourced to former government auditors and are conducted round the year.

  • Steep 2-10% compounding fees for the smallest of delays or oversight.

  • The ban on re-granting has made NGO collaboration very difficult and expensive.

Finally, the rules are neither defined clearly, nor interpreted in a consistent manner. So even in the best cases, there is always an element of guess-work and arbitrariness.
Sanjay Agarwal, Author of Account Aid FCRA Handbook 2021

Oxfam India Vs Public Interest?

To make matters worse, NGOs often receive terse explanations for cancellation or non-renewal of certificate.

Under the old and new laws, the government can refuse to grant an FCRA licence on very broad grounds as Luthra explained. Some grounds are well accepted, such as, if it hurts the 'sovereignty and integrity of India', others are vague, such as, if it hurts 'public interest'.

That's why Oxfam India lost its FCRA registration. And they found out only upon checking the government website—which cited section 12 (4) (f) (3) or 'public interest'.

"There hasn't been any communication from the government directly to us till now," said Oxfam India's spokesperson in an emailed response to BloombergQuint's queries.

"If there has been indeed any procedural inaccuracy, we would be more than eager to correct them to ensure that our FCRA license can be renewed."

The non-profit, that works with marginalised communities, said 80% of its funding will be affected by this.

"We have filed a review application last week (Jan. 14) with the MHA along with a letter urging them to reconsider their decision. We are yet to hear from them," said the spokesperson.

The government can refuse to renew an FCRA certificate if it believes that any provisions under the FCRA have been breached, Luthra said. But, communication of reasons is mandatory, he added.

The failure to communicate reasons is a ground for challenge by revision. If not successful, a writ petition would lie to the high court.
Sidharth Luthra, Senior advocate and former Additional Solicitor General of India

In general, courts have been quite fair in providing relief, said Agarwal. However, the process takes time and often the NGO is unable to sustain the momentum for long.

Srinath said even if NGOs fight and do win, "they find that they have become persona non grata with even domestic funders".

The net effect of FCRA vagaries, renewal of tax exemption certificates and stricter compliance requirements for CSR funding is a regulatory maze, she added, which even the largest and best-equipped organisations have difficulty navigating.

The net effects are to deter international funding to India, narrow the domains in which the sector is able to operate, making it near impossible to work in areas like human rights, democratic freedoms, combating the climate crisis, seeking accountability from either government or business, even to question official data.
Ingrid Srinath, Social Sector Expert

Agarwal uses humour to underscore the combined effect of fear and confusion in the non-profit sector. "There’s a big tapestry of mythology and mystery around FCRA, also sometimes called Foreign Contribution (Retribution) Act."

In 2021, the Supreme Court heard and reserved order on a challenge to the FCRA Amendment Act, 2020 filed by a group of NGOs. Read more about the case here.

This week, a PIL was admitted in the Supreme Court against the last round of FCRA non-renewals.

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